Small businesses are always seeking ways to increase profits. But veteran business owners know that only focusing on increasing sales is short sighted. Business owners must also find ways to cut margins to generate income by looking at receivables. Ensuring that your business receives the funds that it is owed for its products and services is a key profit driver, but is often ignored by novice business owners. Here are a few tips from the experts that are guaranteed to generate money from receivables.
Focus on Receivables. Don’t just rely on sales as an avenue for profit. Make debt collection a top priority in your company. More sales almost guarantees rising defaults on products and services. When a business is new, it will try many tactics to induce rapid growth. Some of these tactics could include lowering credit standards. However, this can be a double-edged sword. As more customers with credit issues interact with businesses, the higher the risk that these individuals will default on payments or commit profit draining chargebacks.
Go Easy on the Credit. There are a number of low-cost services that owners can utilize to find the credit status of potential customers. For large scale customers, businesses can also contract with factoring companies that specialize in evaluating credit risks before extending credit. Until a new business is established, it may be wise to extremely selective about which clients to extend credit to.
State Your Expectations. Make sure that your invoices state payment dates clearly at the top of the invoices. Not only should it state the payment due date, but late payment penalty costs should also be included. At the point of sale, ensure that your sales associates and managers give verbal reminders to customers of payment dates as well.
Make Payment Easy. Oftentimes, businesses can make it difficult for customers to pay their bills. Fast and convenient payment processes like pay online and pay by phone are critical to maintaining integrity in receivables. If you make it difficult to pay, then defaults are more likely to occur.
Performing collection services can be challenging for new businesses, so some turn to experienced payment processors like eMerchantBroker.com for help. EMB is the preferred processor for Collections Max, and Industry Leading Collections Software. Contact us to establish a collection agency merchant account.